CBN’s initiatives to boost economy amidst myriad of challenges
By Dele Ojo
Since Nigeria became independent, achieving economic development through rapid industrialization has elusive, and this has been the principal focus of the various administrations in the country. Thus, different economic development policies have been adopted ranging from Import Substitution Strategy (ISS) through indigenization to the Structural Adjustment Program (SAP). It also seemed as if none of these policies provided sufficient antidote to the challenges of the country’s industries such that many have concluded that the more new policies were introduced, the farther the country moved away from being industrialized.
Also, the discovery of crude oil, which immediately became the primary export commodity and foreign exchange earner, was to worsen the situation leading to the almost total neglect of industries.
As in the past, the government early in 2007 responded by introducing a new industrial development policy, which was based on the Cluster Concept. But, given past experiences, many are not yet convinced that this is the long term solution to Nigeria’s industrial development challenges.
And in the current dispensation, government’s industrialisation focus is on small and medium scale enterprises and is one of the five key execution priorities of its four-year Economic Recovery and Growth Plan (ERGP). Other stated priorities are the stabilisation of the economy, energy sufficiency, improvement of transportation infrastructure, and the achievement of food security. To ensure optimal execution of the ERGP, the Nigerian government resolved in August 2017 to conduct sector or focus labs “designed to tackle complex challenges by bringing together all stakeholders to identify the root causes of the challenges [within a sector] and [generate] ideas and resources to solve them.
Perhaps it is on the above premise that the Central Bank of Nigeria (CBN), recently announced a new financial instrument aimed at supporting companies to boost local productivity, create wealth and stave off importation responsible for Nigeria’s foreign exchange crisis.
The 100 for 100 PPP initiative, a Policy on Production and Productivity, it is envisaged, would empower 100 companies in 100 days, and hundreds more in the coming months, the governor of the Central Bank of Nigeria, Godwin Emefiele, announced, saying the move is to reverse the country’s over-reliance on imports.
According to Central Bank “ In furtherance of its core mandates of delivering price and financial system stability, and promoting sustainable economic development, the 100 for 100 Policy on Production and Productivity (PPP) is introduced by the Central Bank of Nigeria (CBN) to stimulate investments in Nigeria’s manufacturing sector with the core objective of boosting production and productivity, necessary to transform and catalyse the productive base of the economy” with the central goal to reverse the nation’s over reliance on import.
The initiative, 100 for 100 PPP, is a financial instrument designed to create the flow of finance and investments to enterprises with potential to catalyse sustainable economic growth trajectory, accelerate structural transformation, promote diversification, and improve productivity.
Quarterly, starting from 1st November 2021, the initiative shall select 100 private sector companies with projects that have potential to significantly increase domestic production and productivity, reduce imports, increase non-oil exports, and overall improvements in the foreign exchange generating capacity of the Nigerian economy.
The initiative, which shall be bank-led, will be rolled over every 100 days (on quarterly basis) with new set of companies selected for financing under the initiative. The initiative shall be implemented in collaboration with relevant stakeholders with focus on micro and macroeconomic impacts, in terms of contribution to the overall economy. The specific objectives of the initiative include:
- catalyse import substitution of targeted commodities;
- increase local production and productivity;
iii. increase non-oil exports; and
- improve foreign exchange earning capacity of the economy.
The activities covered by the scheme can be in any of the following:
- Manufacturing;
- Agriculture and agro-processing;
iii. Extractive industries;
- Petro-chemicals and renewable energy;
- Healthcare and pharmaceuticals
- Logistics services and trade-related infrastructure e.g. cold chain
solution, quality assurance infrastructure; and
vii. Any other activities as may be prescribed by the CBN.
The bank has launched several initiatives in recent years to support Nigeria’s private sector, as it battles an importation-fuelled foreign exchange crisis that has sent the Naira crashing over 30 per cent in the last one year.
And to stem the rising youth unemployment and underemployment, the bank also recently developed the Tertiary Institutions Entrepreneurship Scheme (TIES), in partnership with Nigerian polytechnics and universities to harness the potential of graduate entrepreneurs (gradpreneurs) in Nigeria. The Scheme is designed to create a paradigm shift among undergraduates and graduates from the pursuit of white-collar jobs to a culture of entrepreneurship development for economic development and job creation. The Scheme thus aims to provide an innovative financing model that will create jobs, enhance the entrepreneurial ecosystem and support economic growth and development.
The broad objective of the Scheme is to enhance access to finance by undergraduates and graduates of polytechnics and universities in Nigeria with innovative entrepreneurial and technological ideas, while priority would be given to innovative entrepreneurial activities with high potentials for export, job creation and transformational impact.
Listing the criteria for prospective beneficiaries of the 100 for 100 Policy on Production and Productivity (PPP) scheme, the Apex bank explained that the selection for participating businesses would be based on the immediate impact the business has on economic growth, jobs creation, and social impact, as “These are projects that must catalyse sustainable employment-led economic growth through increased domestic production and productivity in the near term.
“The projects for consideration shall be new projects in existing companies requiring new machinery and other support and must have the greatest potential to achieve significant scale in their in-country production and for domestic consumption and exports,” it stated.
But the instrument is for only new projects as it will not cover any refinance of existing facilities and will be subjected to an independent evaluation by international audit firms.
“All intervention under this project will be made public and published in national dailies. The CBN will work with fiscal authorities to facilitate power sector, port and export reforms as well as ease of doing business to improve competitiveness in Nigeria so as to complement and propel this initiative.
Commenting on the initiatives, Managing Director/Chief Executive, Credent Investment Managers Limited, Ibrahim Shelleng, applauded the scheme, pointing out that the, “scarce foreign exchange should really be used to develop rather than subsidize the economy’’ but cautioned that there might be potential drawbacks if the scarce foreign exchange ended up in the hands of a few “small clique”.
He also expressed confidence that the policy would achieve its objectives in view of the fact that the central bank had insisted that companies involved must have projects that have significant foreign exchange earnings potential adding stressing, “that in itself may drive more FX inflow”.
Also, Managing Director/Chief Executive, SD&D Capital Management Limited, Idakolo Gbolade, lauded the new policy, as it would boost local production for new projects to be embarked upon by these companies.
He said, “The major problem affecting the manufacturing sector has been scarcity of FX, adding, “With this initiative foreign exchange will be make available to the designated companies to ensure the procurement of the needed raw materials.”
Manufacturing in Nigeria is beset with quite a few challenges; chief among them is power supply. Most firms rely on “emergency” power generators to run seamless operations, adding to costs. There are also regulatory issues, a multiplicity of taxes, and trade facilitation issues, among others. The country’s infrastructural deficiencies are also a major constraint. Export processing zones and special economic zones are the government’s workaround towards removing or mitigating this constraint.
There is a need to develop the transportation sector to the point where it can support the manufacturing sector and also support the economy.” A report on the Nigerian manufacturing sector by the National Bureau of Statistics (NBS) in 2014 put them as follows: inadequate and epileptic power supply, high taxes, poor infrastructure, and supply.
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